United States Environmental Policy: Past, Present and Future

Volume 34 Issue 2 The International Law of Natural Resources and the Environment: a Selected

Bibliography

Spring 1994

United States Environmental Policy: Past, Present and Future United States Environmental Policy: Past, Present and Future

Robert W. Hahn

Recommended Citation Recommended Citation Robert W. Hahn, United States Environmental Policy: Past, Present and Future, 34 Nat. Resources J. 305 (1994). Available at: https://digitalrepository.unm.edu/nrj/vol34/iss2/3

This Article is brought to you for free and open access by the Law Journals at UNM Digital Repository. It has been accepted for inclusion in Natural Resources Journal by an authorized editor of UNM Digital Repository. For more information, please contact [email protected], [email protected], [email protected].

https://digitalrepository.unm.edu/nrj/vol34

https://digitalrepository.unm.edu/nrj/vol34/iss2

https://digitalrepository.unm.edu/nrj/vol34/iss2

mailto:[email protected],%[email protected],%[email protected]

ROBERT W. HAHN*

United States Environmental Policy:Past, Present and Future

ABSTRACT

This essay examines the evolution of the EPA and federal environ-mental policy. It has three objectives: first, to characterize UnitedStates environmental regulation and identify key themes in theregulatory process; second, to examine the role of the Bush presiden-cy in affecting environmental policy; and third, to suggest wherefederal environmental regulation is headed. The intent here is not toprovide a scorecard on successes and failures in environmentalpolicy, but rather to highlight the nature of the forces that haveaffected and will continue to affect the broad outlines of environmen-tal policy.

1. INTRODUCTION

The United States now spends more than any other country inthe world on cleaning up the environment. In 1993, $140 billion wasspent on the environment, or about 2.4 percent of GNP.',2 Theseexpenditures are a direct result of laws regulating the environment,which are administered by the United States Environmental ProtectionAgency (EPA). The EPA is, arguably, the most powerful agency in theUnited States that regulates health, safety or the environment. Since itsinception in 1970, the EPA has been given an increasing amount ofresponsibility and power to control pollution.

* The author is a Resident Scholar at the American Enterprise Institute and an AdjunctResearch Fellow, John F. Kennedy School of Government, Harvard University. I would liketo thank Frank Blake, Terry Davies, Chris DeMuth, Don Elliott, Scott Farrow, Art Fraas, RickFreeman, Dick Morgenstern and Rob Stavins for offering constructive feedback on thisresearch. In addition, I gratefully acknowledge the research assistance of Matt Borick,Elizabeth Baldwin, Suzanne Grover, Michelle Katics and Brooks Shirey. Financial supportwas provided, in part, by the National Science Foundation Decision, Risk and ManagementScience Program. This paper represents my views and does not necessarily reflect the viewsof any individuals or institutions with which I am affiliated.

1. Office of Policy, Planning and Evaluation, U.S. Environmental Protection Agency, EPA-230-11-90-083, Environmental Investments: The Cost of a Clean Environment (1990).

2. Estimates for costs and monetary benefits are given in 1990 dollars unless otherwisenoted. The implicit GNP deflators used to convert figures to 1990 dollars are taken fromCouncil of Economic Advisers, Economic Report of the President (1991).

NATURAL RESOURCES JOURNAL

In general, federal environmental policies have had a positiveimpact on cleaning up the environment, though the precise magnitude ofthis impact is difficult to measure. Overall trends in air quality arepositive for conventional air pollutants, such as sulfur dioxide and lead.Indeed, since 1970, there has been a downward trend for most significantair pollutants, with the exception of nitrogen oxides. The picture for toxicpollutants is less clear, but there is reason to believe that toxic airpollutant emissions were reduced, and will continue to decline substan-tially in the future as a result of the 1990 Clean Air Act Amendments.The trends in water quality are less dramatic. Some waterways havedefinitely improved, particularly those near urban areas that were highlypolluted in the early 1970s. Other waterways have remained roughly thesame or have deteriorated in quality. The data strongly suggest there hasbeen great progress on local pollution problems. In the last few years,there appears to have been substantial progress in reducing the amountof toxic material produced. Moreover, the health data suggests that thecancer risk from toxic emissions is relatively small, accounting for onlyabout two percent of total cancers.3

At a global level, there is less cause for optimism. Major globalconcerns include the depletion of stratospheric ozone, climate change, andthe loss of species resulting from the destruction of natural habitats, mostnotably forests. Concern with the depletion of the ozone layer in thestratosphere has led to a concerted international effort to phase out theuse of chlorofluorocarbons (CFCs) and halons, the principal chemicalsthat cause this depletion. The United States has been one of the leadersin developing the scientific and economic basis upon which to addressthis issue. It is also a signatory to the Montreal Protocol, which calls forthe accelerated phase-out of CFCs and halons. The verdict is still out onglobal climate change, as the nations of the world try to develop a set ofpolicies that will sensibly address this issue. In response to the pervasiveuncertainties associated with climate change, the United States Govern-ment has developed an aggressive research program with projectedoutlays of $954 million in 1991. At the same time, the United States,under the Bush administration, resisted setting targets and timetables forgreenhouse gas reductions in light of the large scientific uncertainties.The Clinton Administration agreed to reduce greenhouse gases to their1990 levels by the year 2000, but the emission reduction strategiespursued by the two administrations were similar.' The United States is

3. R. Doll & R. Peto, The Causes of Cancer: Quantitative Estinates of Avoidable Risks of Cancerin the United States Today, 66 J. Natl Cancer Inst. 1193, 1256 (June 1981).

4. Office of Science and Technology Policy, Our Changing Planet: The FY 1992 U.S.Global Change Research Program (1991).

5. Both administrations basically proposed a "no-regrets" strategy. This strategy would

[Vol. 34

U.S. ENVIRONMENTAL POLICY

also exploring various approaches to preserving forestry and encouragingmore tree planting. Examples include debt-for-nature swaps and domestictree-planting programs initiated by the Bush Administration.6

In addition to international issues that affect the global environ-ment and quality of life, the state of the environment in Eastern Europe,the Soviet Union, and other developing countries has become a moresalient issue. There is increasing concern about decreases in water and airquality, soil erosion and the availability of water in less-developedcountries. Government agencies, environmental groups, and businessesare addressing these issues in a variety of ways, such as increased foreigninvestment, help in designing environmental laws and the provision oftechnical assistance. In addition, several efforts have highlighted the needto coordinate environmental and economic policies in ways that promoteenvironmental protection and economic growth.7

United States federal environmental policies over the last twodecades have met with considerable success in cleaning up the localenvironment. Yet, there is a great deal of debate about whether thesepolicies have been worth the cost. In terms of economic benefits andcosts, the numbers suggest benefits exceed costs for federal policiesregulating air pollution, but fall short of the costs for policies regulatingwater pollution, with overall benefits and costs of past environmentalprograms being comparable.8 Future environmental regulations are muchless likely to pass narrow benefit/cost tests that are based on the risksreduced. The reason is that we have already implemented most of therelatively easy fixes for cleaning up the environment.

Over time, the mission of the EPA has been redefined. UnderAdministrator Costle, who served under President Carter, the emphasiswas on reducing health risk. Now, the agency is moving away fromhealth risk, toward a greater concern with ecology.9 Concern aboutglobal environmental issues and sustainability are coming to the fore asa new environmental consciousness is beginning to emerge. Electedofficials and the EPA are beginning to develop a new agenda that is more

implement policies that make good sense anyway, prioritizing those that reduce greenhousegas emissions. President Clinton's plan is more extensive, yet even with these additions tothe proposal, the plan may fail to reach its targets. See J. Cushman, Clinton Wants toStrengthen Global Pact on Air Pollution, New York Times, Aug. 16, 1994, at AI0.

6. Council on Environmental Quality, The View from CEQ: A Collection of CEQ Clips,Speeches and Other Current Information, (Sept. 30, 1991).

7. F. Cairncross, Costing the Earth: The Challenge for Governments, the Opportunitiesfor Business (1992).

8. P. Portney, Air Pollution Policy, in Public Policies for Environmental Protection (P.Portney ed., 1990); A. Freeman, Ill, Water Pollution Policy, in Public Policies for Environmen-tal Protection (P. Portney ed., 1990).

9. Cairncross, supra note 7.

Spring 1994]


responsive to the public's demands for environmental progress and thedemands of the environmental groups. This agenda includes a greaterconcern for man's relationship to the planet and "sustainable" develop-ment."0 It also includes a reassessment of how economic tools might beused to promote environmental quality."

This essay examines the evolution of the EPA and federalenvironmental policy. Federal policy is the focus because it has been thedriving force behind the dramatic growth in environmental expendituresover the last two decades. The paper has three objectives: first, tocharacterize United States environmental regulation and identify keythemes in the regulatory process; second, to examine the role of the BushAdministration in affecting environmental policy; and third, to suggestwhere federal environmental regulation is headed. The intent here is notto provide a scorecard on successes and failures in environmental policy,but rather to highlight the nature of the forces that have affected and willcontinue to affect the broad outlines of environmental policy.

Section 2 provides an introduction to federal environmentalpolicy in the United States. The impact of the Bush Administration onenvironmental policy is evaluated in Section 3. Section 4 considers thefuture of federal environmental policy.

2. A SHORT COURSE ON FEDERAL ENVIRONMENTAL POLICY

All three branches of government exert control over importantaspects of federal environmental policy. Congress enacts the laws andalso has some informal control over how the laws are implemented. Theofficial responsibility for implementing the laws is left to the ExecutiveBranch. In particular, EPA is primarily responsible for administering mostenvironmental statutes, though the Department of the Interior and theDepartment of Agriculture also play important roles in different policyarenas. While EPA has generally been the dominant administrativeagency in designing and promulgating regulations, there have been anumber of notable attempts on the part of the Executive Office of thePresident, government departments and other regulatory agencies toinfluence environmental policy. 2 An inherent source of conflictbetween EPA and the White House is that EPA seeks to further its ownagenda while balancing the concerns of Congress and the White House;in contrast, agencies and individuals representing the Executive Office of

10. H. Daly, Toward Some Operational Principles of Sustainable Development, 2 Ecol. Econ. 1(1990).

11. R. Hahn, A Primer on Environmental Policy Design (E. Bailey ed., 1989).12. Examples include policies related to vehicle mileage standards and the introduction

of alternative fuels.

I [Vol, 34


the President are trying to promote the President's broader agenda. Thecourts have also played a major role in shaping environmental policy,forcing EPA and the states to meet statutory deadlines, and sometimescalling for the imposition of major sanctions if deadlines are not met.13

There is a great deal of inertia in this system, with the variousinstitutions imposing important checks and balances. This inertia makesit difficult for the President to change policy dramatically over the longterm without at least some form of acquiescence from EPA and theCongress. For example, attempts to streamline or dismantle someenvironmental regulations in the early years of the Reagan Administra-tion were met wiith vigorous resistance from Congress as well asenvironmental groups." Indeed, in 1984 Congress passed amendmentsto the Resource Conservation and Recovery Act, which included"hammer" provisions that forced the agency to adopt specific regulationswhen it was unable to devise satisfactory alternatives within the specifiedtime frame.' s

There has been a steady increase in EPA's authority since itsinception. Table I provides an overview of the major federal laws, whichEPA has primary responsibility for administering. Some of these laws aremedia-specific, targeted, for example, at improving water quality or airquality. Others cover the use of specific chemicals, such as pesticides ortoxic pollutants.

As can be seen from the table, major environmental laws andamendments involving EPA have been enacted during all recentadministrations. There is every reason to believe that such laws willcontinue to be passed with some regularity. This trend reflects thepublic's growing demand for the government to address environmentalconcerns. It also reflects our evolving understanding of how laws areimplemented as well as the science governing environmental processes.

13. S. Melnick, Regulation and the Courts (1983); E. Warren & G. Marchant, More GoodThan Harm: A First Principle for Environmental Agencies and Repiewing Courts (1993)(forthcoming in the Ecol. LQ., Nov. or Dec. 1994).

14. M. Kraft & N. Vig, Environmental Policy from the Seventies to the Nineties: Continuity andChange, in Environmental Policy in the 1990s: Toward a New Agenda (M. Kraft and N. Vigeds., 1990).

15. See, for example, R. Hahn, An Evaluation of Options for Reducing Hazardous Waste, 12Harv. Envtl. L Rev. 201 (1988).

Spring 19941


Table 1

MAJOR FEDERAL LAWS ON THE ENVIRONMENTIMPLEMENTED BY THE EPA

1970 Clean Air Act Amendments

1972 Federal Water Pollution Control ActFederal Environmental Pesticides Control ActMarine Protection Act

1973 Safe Drinking Water Act

1976 * Toxic Substances Control ActResource Conservation and Recovery Act

1977 Clear Air Act AmendmentsClean Water Act Amendments

1980 Comprehensive Environmental Response, Compensation, &Liability Act

1984 Resource Conservation and Recovery Act Amendments

1986 Safe Drinking Water ActSuperfund Amendments & Reauthorization Act

1987 Clean Water Act AmendmentsGlobal Climate Protection Act

1988 Ocean Dumping Act

1990 Clean Air Act AmendmentsPollution Prevention ActOil Spill Prevention Act

Source: M. Kraft & N. Vig, Environmental Policy from the Seventies to the Nineties: Continuityand Change, in Environmental Policy in the 1990s: Toward a New Agenda (M. Kraft & N.Vig eds., 1990) (Updated by author).

[Vol. 34


Environmental Quality Trends

The best data on environmental trends in the United States overthe last several decades are for air emissions. Table 2 shows air pollutionemissions for selected. years since 1940. The second part of the tableshows annual growth rates in emissions and pollution by decade.

Since 1970, both lead and total suspended particulates, the twoair pollutants thought to present the greatest health risks to humans, havedeclined substantially. Sulfur oxides emissions, a by-product of fuelcombustion, rose between 1940 and 1970 and have generally declinedsince then. They will decline substantially over the next decade as powerplants and industrial sources will be asked to cut their total sulfur oxideemissions to roughly half of 1980 emission levels by the year 2000. Thetwo pollutants directly affecting ground level ozone-nitrogen oxides andvolatile organic compounds--exhibit similar patterns. Emissions ofnitrogen oxides rose fairly steadily from 1940 to 1980, but have declinedslightly since then. Volatile organic compounds, a major fraction of whichcome from automobiles, increased between 1940 and 1970, but have beenreduced substantially as better pollution control systems for vehicleemissions were introduced. Carbon monoxide, another by-product ofvehicles, exhibits a similar qualitative pattern to volatile organiccompounds.

The story to be gleaned from this air quality data is thatemissions exhibit different trends between 1940 and 1990; however,between 1970 and 1990, there has been substantial progress in reducingemissions from all air pollutants, with the exception of nitrogen oxides.The extent to which these pollution reductions are directly attributable tothe implementation of federal pollution control laws is more difficult todetermine. Federal regulations on the automobile probably stimulatedemission reductions, most notably for carbon monoxide and volatileorganic compounds. In addition, federal regulations phasing out the useof lead in gasoline had a notable effect, helping to reduce lead emissionsby over 95 percent over the last two decades.16 In contrast, some federalregulations regulating the emissions of sulfur oxides may have had theopposite effect. Requiring new power plants to be substantially cleanerthan old plants provided an incentive for plant owners to extend the lifeof existing plants.

16. Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency,EPA-454/R-92-013, National Air Pollutant Emission Estimates, 1900-1991 (1992).

Spring 19941


Table 2

NATIONAL AIR POLLUTANT EMISSIONS

Pollutant (million metric tons per year)

Volatile Carbon LeadSulfur Nitrogen Organic Mono- (1000s of

Year Particulates Oxides Oxides Compounds xide shorttons)

19401950196019701975198019811982198319841985198619871988198919901991

1940-19501950-19601960-19701970-19801980-1990

22.824.821.819.011.09.18.07.17.17A7.96.76.97.57.27.47.4

0.9%-1.2%-1.3%-5.2%-1.9%

18.120.320.228.425.522.722.521.220.621.521.720.920.520.620.821.120.7

6.89.4

13.219.020.323.620.920.019.419.819.419.119.420.019.819.418.8

Percent Annual Growth Rates

1.2%-0.1%4.1%-2.0%-0.7%

3.8%4.0%4.4%2.4%

-1.8%

2.2%1.9%2.2%

-2.0%-1.9%

80.386.4

103.6123.6104.8100.0

77.572.574.571.983.163.263.464.760.467.762.1

0.8%2.0%1.9%

-1.9%-3.2%

nanana

199.1143.868.056.054.546.640.218.38.48.07.67.25.15.0

-6.6%-9.3%

Sources: Office of Air Quality Planning and Standards, U.S. Environmental ProtectionAgency, EPA-450/ 4-91-026, National Air Pollutant Emission Estimates, 1940-1990 (1991);Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, EPA-454/ R-92-013, National Air Pollutant Emission Estimates 1900-1991 (1992).

[Vol. 34


Overall environmental trends in water quality are much moredifficult to assess than air quality trends. There is no good overallmeasure of water quality, and the existing data provides a mixed pictureabout trends in water quality. There are cleanup successes, such as theCuyahoga River, along with problems, such as Boston Harbor and theChesapeake Bay. The data for water quality highlight this ambiguity.Water quality records from the United States Geological Survey'sNational Stream Quality Accounting Network, a nationwide samplingnetwork, provides useful information concerning water quality trends. Incontrast to the data on air quality, which focus on emission trends, thedata on water quality provide measures of the actual pollution levelsmeasured in streams and rivers. There appears to be no good data at anational level on actual emissions or effluent into water bodies. Thismakes it very difficult to link changes in air and water pollutionregulations to changes in water quality.

Table 3 provides an overview of water quality trends for 1978-1987.

The primary conclusion to be drawn from the data is that mostof the monitoring stations show no trend upward or downward for mostpollutants. Common ions, such as sodium and chloride, exhibit moreincreases than decreases at monitoring stations. Nitrogen pollution alsoincreased at many stations while phosphorous loadings decreased at anumber of sites. Alkalinity and pH were up in several streams, suggest-ing the water was less acidic. For the trace metals, the most notablepatterns were for arsenic, cadmium and lead, all of which showedsubstantially more decreases than increases. Dissolved oxygen deficit andbacteria levels, which are traditional measures of water quality, exhibitedfew significant trends. To the extent that trends were exhibited by thesemeasures, there were more decreases in pollution than increases. Relatingthese trends to emissions patterns is difficult. Automobile emissions area strong candidate for the decline in water lead levels, although thecausality is difficult to show. Controls on emissions from major pollutionsources are possible causes of the declines in cadmium and arsenic,although there are not conclusive results. The large number of increasesof pH and alkalinity at various sites may be related to reduced emissionslevels in urban areas.

Spring 19941


Table 3

WATER QUALITY INDICATORS (1978 - 1987)

Row-Adjusted Concentration

N' + 0

Common ions 393 91 42 260Calcium 393 50 31 312Magnesium 392 76 25 291Sodium 393 55 29 309Potassium 393 42 54 297Sulfate 393 64 36 293Chloride 392 65 32 295Dissolved solids 388 84 22 282

Nutrients and suspended solids 389 67 61 261Nitrogen 390 82 24 284Phosphorus 389 12 69 308Suspended solids 153 13 19 121

DOD and bacteria 380 25 52 302Oxygen deficit 316 12 39 265Fecal coliform 390 24 51 315Fecal streptococcus 366 20 36 310

pH and alkalinity 385 115 12 258pH 387 91 12 284Total Alkalinity 385 82 9 298

Trace Metals 1 380 16 53 311Copper 371 17 27 327Iron 382 16 59 307Manganese 375 10 41 324Nickel 352 12 17 323Zinc 381 3 20 358

Trace Metals II 367 12 89 266Arsenic 383 3 94 286Cadmium 360 4 58 298Chromium 306 1 13 292Lead 374 4 45 325Mercury 360 16 12 332Silver 321 3 0 318Selenium 312 14 11 287

'N is the number of stations analyzed; plus, minus, and 0 indicate uptrend, downtrend, andno trend at the 0.10 significance level. DOD denotes dissolved 02 deficit.

Source: D. Lettenmaier et al., Trends in Stream Quality in the Continental United States, 1978-1987, in Water Resources Research 327 (Mar. 1991).

(Vol. 34


As with air quality, water quality trends vary as the period understudy changes. Examining the period from 1974-1981, one study foundincreases, rather than decreases, in cadmium and arsenic. 7 A keychallenge for social scientists is to identify the linkage between particularpollution control policies and particular trends in environmental quality.Once this linkage is drawn, it is then possible to estimate the benefits ofparticular policies.

These water quality emission trends suggest that there has beensome progress in improving water quality as a result of reducing leademissions and emissions from power plants and industrial sources.Further, there are some noteworthy success stories of how particularrivers and lakes have been revived. On the basis of the data, however, itis difficult to predict how general measures of water quality will changein the future.

A new source of data on toxic emissions, known as the ToxicsRelease Inventory (TRI), is likely to have a dramatic impact on the qualityof individual emissions data from firms. It will also have a notableimpact on the way firms do business in the future. Under the EmergencyPlanning and Community Right-to-Know Act, passed in 1986 as part ofthe Superfund reauthorization package, firms are required to submitannual reports identifying their emissions into air, water, and land.Facilities must report the amount of various toxic materials that arereleased directly into the environment. They must also note the quantityof chemicals that are moved off-site to chemical treatment, storage anddisposal facilities. The quality of this data is open to some question.Firms are not required to verify the data; nor are they required to reporton the range of uncertainty. The quality of the data can be expected tovary considerably across firms. Assuming that firms generally try tocomply with these requirements, there is reason to believe that thequality of the data will improve over time as firms learn how to meet therequirement of the law. EPA believes that the quality of the data hasgenerally improved over time.

Data have been collected for only five years so far, from 1987-1991. Despite the short time period, the data exhibit some strikingpatterns, some of which are highlighted in Table 4.

17. R. Smith et al., Water Quality Trends in the Nation's Rivers, 235 Science 1607 (1987).

Spring 1994]


Table 4

ENVIRONMENTAL DISTRIBUTION OF THE CHANGES IN TRIRELEASES AND TRANSFERS (1989-1991)

TYPE OF RELEASE RELEASE OR RELEASE OR RELEASE OROR TRANSFER TRANSFER TRANSFER TRANSFER

1991 1990 1989Millions Millions Millionsof Pounds of Pounds of Pounds

Air 1,979.3 2,282.7 2,562.2Surface Water 243.5 196.8 188.0Land 421.2 462.7 455.0Underground Injection 710.2 745.4 1,175.6Public Sewage 410.6 466.1 558.6Off-site 654.3 8421x 890.4TRI Total Releases

& Transfers 4,419.2 4,996.2 5,829.8

CHANGE CHANGE1989-1991 1990-1991Percent Percent

Air -22.7 -13.3Surface 29.5 -23.7Water - 7.4 - 9.0Underground Injection -39.6 - 4.7Public Sewage -26.5 -11.9Off-site -26.5 -22.3TRI Total Releases

& Transfers -24.2 -11.5

Source: Office of Pollution Prevention and Toxics, U.S. Environmental Protection Agency,EPA 745-R-93-003, 1991 Toxic Release Inventory: Public Data Release (1993).

[Vol. 34


The table shows releases or transfers to different media andfacilities, measured in terms of millions of pounds. The most strikingfeature of the table is the dramatic decline in emissions to all media.Releases or transfers to all media declined by over 24 percent between1989 and 1991. While there was a great deal of variation across mediaand chemical classes, the general trend was downward for mostcategories."' In the future, the TRI data will be a rich source of informa-tion for building better emission inventories and identifying trends.

Economic Costs and Benefits

An ideal economic measure of the costs and benefits of regulationwould begin with the impact on individual welfare. Such measures arenot available for the universe of environmental laws and regulationsconsidered here, though some progress has been made in developingmore inclusive measures for selected environmental controls."'

The most complete information on the cost of environmentalregulation in the United States has been compiled by the EPA. It includesboth administrative costs as well as the direct costs of compliance borneby businesses and individuals meeting EPA's major pollution controllaws."° It also includes expenditures at the local level for relatedactivities, such as trash collection. Table 5 shows the annualized cost ofmeeting existing and new regulations for the years 1972 through 2000.

18. Office of Pollution Prevention and Toxics, U.S. Environmental Protection Agency, EPA745-R-93-003, 1991 Toxics Release Inventory: Public Data Release (1993).

19. For a critical discussion of different approaches for measuring the costs of regulation,see RL Hahn & J. Hird, The Costs and Benefits of Regulation: Review and Synthesis, 8 Yale J.Reg. 233, 239-247 (1991).

20. The costs do not include the impact of regulation on investment or innovation. Forexamples of approaches that attempt to measure economy-wide impacts of environmentalregulations, see M. Hazilla & R. Kopp, The Social Cost of Environmental Quality Regulations;A General Equilibrium Analysis, 98 J. Pol. Econ. 853 (1990). See also D. Jorgensen & P.Wilcoxen, Environmental Regulation and U.S. Economic Growlth, 21 Rand J. Econ. 314 (1990).

Spring 19941


Table 5

TOTAL ANNUAL COSTS FOR EXISTING AND NEW REGULATIONS(Millions of 1990 Dollars)

Year Existing NewRegulations Regulations

19721973197419751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000

$30,600$34,968$38,842$42,572$48,038$53,743$58,334$63,351$66,985$69,955$70,762$75,661$80,801$85,534$92,259$98,149

$100,150$104,541$107,857$113,193$117,694$121,672$125,364$128,800$132,206$135,831$139,458$143,082$146,674

$237$407

$2,103$4,403$7,524

$10,705$13,024$14,463$13,890$15,708$17,285$18,951$21,747$22,617$24,234

Total Percent TotalAnnualized of GNP CostsCosts, Excluding

SolidWaste2

$30,600$34,968$38,842$42,572$48,038$53,743$58,334$63,351$66,985$69,955$70,762$75,661$80,801$85,534$92,496$98,556

$102,253$108,944$115,380$123,898$130,718$136,135$139,254$144,508$149,491$154,782$161,205$165,699$170,908

0.9%1.0%1.1%1.2%1.3%1.4%1.4%1.5%1.6%1.6%1.7%1.7%1.7%1.8%1.9%1.9%1.9%2.0%2.1%2.2%2.3%2.4%2.4%2.4%2.5%2.5%2.6%2.6%2.6%

$20,852$24,686$28,040$31,259$36,033$40,651$44,560$48,351$51,256$53,854$55,742$60,830$64,748$68,678$74,358$79,278$83,240$89,576$95,475

$103,000$109,055$113,808$116,277$121,055$125,519$130,351$136,316$140,368$145,138

'Costs are annualized at 7%.2A large portion of solid waste expenditures is for garbage collection, which is nottraditionally counted as a regulatory cost.

Source: Office of Policy, Planning and Evaluation, U. S. Environmental Protection Agency,EPA-230-11-90-083, Environmental Investments: The Cost of a Clean Environment (1990).

[Vol. 34


The time period 1972-1987 is based on actual cost data; the period19882000 is based on extrapolations based on the past cost of regulationsand the estimated cost of new regulations.21 In 1993, the United Statesspent about $140 billion on expenditures related to reducing pollution, orabout 2.4 percent of GNP. This is nearly half of what the United Statesspent on national defense' The table reveals that there has been overa three-fold increase in the cost of environmental regulation between 1972and 1987, and this increase is projected to continue, with expenditures of$171 billion projected in the year 2000. Environmental expenditurescontinue to account for a larger share of GNP, moving from just under1 percent in 1972 to just over 2 percent in 1990. By the year 2000,environmental expenditures are expected to account for 2.6 percent ofGNP.

To better understand the impact of a statute or policy on theeconomy, it is useful to combine specific estimates of economic costs andbenefits. Economists have attempted to measure the benefits of environ-mental programs in a variety of ways, which can broadly be separatedinto direct and indirect approaches.' The direct approach, known ascontingent valuation, asks individuals what they would be willing to payto have a cleaner environment. Thus, for example, in Los Angeles, anindividual might be shown two pictures, one on a day when themountains were not visible and one on a day when the mountains wereclearly visible. Then, an interviewer would ask the respondent to selectan increase in monthly electricity bill a person would be willing to payto have more days of improved visibility. A second approach tomeasuring an individual's willingnesg to pay for different environmentalamenities uses indirect statistical techniques. For example, workers inhigh-risk industries might receive higher wages than workers incomparable jobs, but with lower risk. Using such data along with workercharacteristics, one can obtain a measure of the amount of compensationrequired for workers to take jobs that pose greater safety or environmen-tal risks. Another application of an indirect approach is to measure thevalue of environmental amenities in a specific region by examining thehousing characteristics and prices, and estimating the fraction of thehousing price or rental price that is associated with living in a neighbor-hood that has lower pollution. A third indirect approach attempts tomeasure the demand for recreation by measuring the costs associated

21. Office of Policy, Planning and Evaluation, supra note 1.22. This is based on an estimate of $294 billion for defense spending in 1993. See

Congressional Budget Office, The Economic and Budget Outlook: Fiscal Years 1994-1998(Jan. 1993).

23. A. Freeman, Ill, The Benefits of Environmental Improvement: Theory and Practice(1979).

Spring 19941


with different recreational activities, including travel costs and time costs.Suffice it to say that none of these approaches are without their difficul-ties, but they are among the few tools economists have to measureeconomic benefits.

A large number of studies attempt to measure the benefits ofdifferent aspects of pollution policy. Freeman reviews and synthesizes thestudies to derive some general estimates of the net benefits associatedwith changes in air and water pollution policy.' For air pollution,Freeman found that the overall benefits from reductions in air pollutionbetween 1970 and 1978 resulted in annual benefits of $8.9 to $93.1 billionwith a most likely value of $39.5 billion. Over three-fourths of the totalbenefits were associated with health, measured in terms of fewer illnessesand longer lives. The costs of air pollution control are estimated to be$15.8 billion per year in 1978.25 Taking the difference between theexpected benefits and costs yields a net benefits in 1978 of about $24billion. Freeman's analysis does not appear to factor in the impact of leadreductions from 1970 to 1978. Based on more recent'benefit/cost analysesfor this pollutant, it would appear that adding in the benefits and costsof lead over this time period would increase the net benefits of airpollution reductions.' Freeman's calculation for air pollution does notinclude data after 1978.3From Table 2, we see that benefits would haveincreased substantially, due to reductions in all of the pollutants shownin the table. In addition, overall benefits would have also increasedbecause population increased by 13 percent between 1978 and 1990.2Assume, for the sake of argument, that benefits increased in proportionto population growth, which yields a conservative estimate for expectedbenefits in 1990 of $44.6 billion. Comparing this with the costs of $31.9billion yields annual net benefits of about $13 billion in 1990. Thus, itwould appear that expected net benefits from air pollution policy werepositive over this time span.28

Some indication of the net benefits associated with new airpollution regulations can be gleaned by an analysis of the benefits and

24. A. Freeman, Ill, Air and Water Pollution Control: A Benefit-Cost Assessment (1982).25. Communications and Public Affairs, U.S. Environmental Protection Agency, 21K-1006,

Environmental Stewardship: EPA's First Two Years in the Bush Administration (1991).26. Office of Policy Analysis, U.S. Environmental Protection Agency, Costs and Benefits

of Reducing Lead in Gasoline: Final Regulatory Impact Analysis (1988).27. Council of Economic Advisers, supra note 2.28. Given the uncertainties in developing the estimates, it is difficult to develop a

meaningful range for either of the two point estimates on net benefits. Combining the pointestimate of the costs for 1978 with the range of benefits estimates yields a range of $-6.9billion to $77.3 billion for net benefits. For 1990, applying the same procedure yields a rangeof $-21.8 billion to $73.3 billion for net benefits. Thus, it is unlikely that net benefits werenegative.

[Vol. 34


costs associated with the Clean Air Act Amendments of 1990. Portneysuggests that annual benefits associated with the amendments are likelyto range between $6 and $25 billion with a best guess of $14 billion. Incontrast, annual costs are in the range of $29 to $36 billion." Portneydoes not provide a most likely estimate for costs. My own analysissuggested that costs are likely to be about $30 billion.' Subtracting myestimate from Portney's benefits estimate yields net costs of $16 billion.Thus, the 1990 Clean Air Act Amendments are expected to have adeleterious effect on economic activity. Of course, there are substantialuncertainties in these estimates, but on the basis of current scientific andeconomic understanding of these issues, it would be fair to say that neteconomic costs are likely to substantially exceed net economic benefits forthese amendments when they are fully implemented.3

For water pollution, Freeman estimates the benefits and costsassociated with implementation of the Federal Water Pollution ControlAct Amendments of 1972 along with subsequent amendments in 1977. Onthe presumption that this Act achieved its objectives, Freeman argues thatthe incremental benefits of meeting water quality objectives in 1985 werebetween $6.9 and $33.5 billion annually, with a most likely estimate of$17.1 billion. The costs of achieving water quality in 1985 were approxi-mately $38.3 billion. Thus, based on this analysis, benefits from waterquality legislation fell short of costs by about $21 billion.32

This brief review of air and water programs suggests that theseprograms are costly. In the case of air, legislation prior to 1990 appearsto have resulted in benefits that exceed costs. The new 1990 air legislationappears to have net costs that far exceed benefits. In the case of water, thecosts of the program appear to have far exceeded the benefits. There aresignificant limitations to such benefit-cost analyses. First of all, they onlycover a limited domain. They do not include the costs and benefits ofmajor laws and regulations covering hazardous waste sites, the use ofpesticides, the use of toxic substances, the use of chlorofluorocarbons and

29. P. Portney, Economics and the Clean Air Act, 4 J. Econ. Perspectives 173 (1990).30. This crude estimate is based on work done while at the Council of Economic Advisers

in 1989. For the time period between 2001 and 2005, it assumes $5 billion for emissioncontrols for acid rain, $20 billion for smog reductions and $10 billion for air toxicsreductions. Note that the estimate falls within Portney's range. If the air toxics provisionson residual risk call for risk reductions to 1 in I million, the costs would be substantiallyhigher than those estimated here. A plausible estimate of the additional costs would be $10billion. See Denny Technical Services, Clean Air Legislation: Cost Evaluation (1990)(prepared for the Business Roundtable, Raleigh, N.C., Jan. 8).

31. Note that in this case the range of benefit estimates provided by Portney is below thepoint estimate for the costs. Thus, the likelihood that net benefits are negative is high.

32. Note that the upper end of the range on benefits is below the point estimate for costs,suggesting that net benefits are likely to be negative.

Spring 19941


halons, and regulations specifically targeted aimed at protecting drinkingwater. Thus, it would be premature to suggest we know enough to makean informed assessment of the cost and benefits of environmentalregulation, even in economic terms. A second limitation is that the dataare subject to great uncertainties. For example, while the total benefits ofcurbing acid rain in the current clean air legislation may have fallen shortof the costs, the range of uncertainty on the benefit estimates wassufficiently large to justify almost any policy, even on narrow economicgrounds. Third, the analysis is global in the sense that it tries to computeaggregate benefits across programs. It does not highlight which particularprograms and regulations confer significant net benefits and which are,on net, quite costly. The latter information is relevant when decision-makers have discretion over shaping individual regulations.

The preceding discussion summarized our understanding of theoverall economic costs and benefits of environmental regulation. Anotheruseful perspective emerges from analyzing the impact of specificregulations. Table 6 lists selected environmental regulations along withtheir cost-effectiveness, which is measured in cost per premature deathaverted. The list is neither exhaustive, nor necessarily representative ofaverage environmental regulations. Moreover, one should not assumethat the numbers are directly comparable to each other because they oftenuse somewhat different measures of cost-effectiveness. For example, EPAoften treats a life that is extended for 1 year in the same way as a life thatis extended for 50 years. Notwithstanding these limitations, the informa-tion in Table 6 illustrates two important points

First, the cost-effectiveness of individual regulations varies.dramatically-ranging from hundreds of thousands to trillions of dollars.This suggests that it would be possible to reduce environmental healthrisks further by reallocating the resources from relative ineffective risk-reduction technologies to more cost-effective strategies. Second, over time,the cost per life saved of proposed rules for environmental protection hastended to increase. This is largely because most of the known environ-mental health risks have been reduced to very low levels in the UnitedStates; thus, making further reductions quite expensive.' ,

3

33. Telephone interview with A. Fraas, Office of Management and Budget (Nov. 22,1991).34. Strictly speaking, one would need to see the entire universe of environmental

regulations to make such a statement. Yet, it appears to be consistent with the data and isalso supported by other evidence. See A. Fraas, The Role of Economic Analysis in ShapingEnvironmental Policy, 54 Law & Contemp. Probs. 113 (1991).

[yol. 3


Table 6

COST-EFFECTIVENESSOF SELECTED ENVIRONMENTAL

PROTECTION AGENCY REGULATIONS

Cost perYear Premature

Regulation' Issued Death Averted2

Trihalomethane Drinking Water Standards 1979 $0.2Cover/Move Uranium Mill Tailings (Inactive Sites) 1983 $31.7Cover/Move Uranium Mill Tailings (Active Sites) 1983 $45.0Standards for Radionuclides in Uranium Mines3 1984 $3.4Benzene NESHAP (Original: Fugitive Emissions) 1984 $3.4Arsenic Emission Standards for Glass Plants 1986 $13.5Arsenic/Copper NESHAP 1986 $23.0Benzene NESHAP (Revised: Coke By-Products 1988 $6.1Hazardous Waste Land Disposal

Ban (1st 3rd) 1988 $4,190.4Municipal Solid Waste Landfill

Standards (Proposed) 1988 $19,107.0Asbestos Ban 1989 $110.7Hazardous Waste Listing for Petroleum

Refining Sludge 1990 $27.6Benzene NESHAP (Revised: Transfer Operations) 1990 $32.9Benzene NESHAP (Revised: Waste Operations) 1990 $168.2Hazardous Waste Listing for Wood

Preserving Chemicals 1990 $5,700,000.0Ethylene Dibromide Drinking Water Standard 1991 $5.71,2 - Dichloropropane Drinking Water Standard 1991 $653.0Atrazine / Alachlor Drinking Water Standard 1991 $92,069.7

'70-year lifetime exposure assumed unless otherwise specified.'In millions of 1990 dollars.

145-year lifetime exposure

Source Office of Management and Budget, Budget for the United States Government, FiscalYear 1992 (1991).

Spring 19941


Understanding the Policy Process

A critical challenge in explaining past environmental policyoutputs is to identify the political forces that gave rise to these outputsalong with key patterns that have emerged.' First, the key politicalforces are identified. Then some key patterns in United States regulationare examined. This analysis helps set the stage for evaluating the BushAdministration's environmental agenda and the future of environmentalpolicy in the United States

There are four forces that are critical in shaping the evolution ofenvironmental policy in the United States. They are: (1) the developmentof the environmental movement; (2) the evolution of industry; (3) thematuration of EPA; and (4) the increased demand for environmentalquality on the part of the electorate. This list is noteworthy for what ispresent as well as what is absent-most notably the Congress, theAdministration and the Courts. Clearly, all of these institutions, andparticularly Congress, have played an important role in shaping policy. 6

Over the long run (i.e., decades), I see these actors as responding to thewill of the electorate and the concerns of special interests. Indeed, onecould make a similar argument for EPA as well, but I prefer to view EPAas a special interest with its own agenda.'

The maturation of the environmental movement is seen in thedramatic increase in the number, size and contributions to environmentalorganizations over the last twenty years.8 It is also seen in the abilityof environmental groups to use the media and the Congress to achievetheir goals. Environmental organizations can be understood in relatively

35. For a more in-depth discussion of these issues, see E. D. Elliott et al., Toard a Theoryof Statutory Evolution: The Federalization of Environmental Law, 1 J. Law, Econ. & Org. 313(1985); R. Hahn, supra note 11; R. Paehlke, Environmentalism and the Future of ProgressivePolitics (1989); B. Yandle, The Political Limits of Environmental Regulation (1989); M. Landy

let al., The Environmental Protection Agency: Asking the Wrong Questions (1990); M. Kraft& N. Vig, supra note 14.

36. For an insightful and provocative discussion of how these institutions interact toshape policy, see M. McCubbins, R. Noll & B. Weingast, Adninistrative Procedures as histru-ments of Political Control, 3 J. Law, Econ. & Org. 243 (1988).

37. Politicians obviously have their own agendas as well. In the past, such agendas havehad an important impact on environmental policy. For example, both Senator Muskie andPresident Nixon had an important impact on shaping the Environmental Protection Agency.Since that time, one could point to several politicians who have seized opportunities topromote environmental initiatives and shape legislation. By not including them asfundamental forces, I do not mean to suggest that these individuals do not make adifference. Rather, it reflects my personal preference to focus on underlying interest groupsrather than specific individuals as explanations for how policy evolves over the longer term.

38. R. Mitchell et al., Twenty Years of Enviromnental Mobilization: Trends Anmong NationalEnvironmental Organizations, 4 Soc. & Nat. Resources 219 (1991).

[Vol. 34


simple, and some might say, crass terms. These organizations have aninterest in sensationalizing environmental issues, so that public opinioncan be mobilized in support of the environmental movement, so that theirorganizations can survive and flourish. This is not to suggest that thereare not important differences between environmental organizations, justas there are important differences among businesses. For example, theEnvironmental Defense Fund has come out in support of environmentalmarkets to control pollution, while the Natural Resources DefenseCouncil is still backing centralized "command-and-control" approachesas the principle method for improving the environment.

Environmental organizations are lobbyists for a particular pointof view, and there is a strong element of self-interest in the positions theytake. For example, environmental organizations rarely suggest that we arespending too much money on a particular environmental effort. Instead,the environmental groups generally accuse the government and industryof foot-dragging. These groups are not particularly interested in abalanced assessment of the science underlying environmental policy.They are interested in persuading the public that more money should bespent on the environment and environmental groups.

A critical feature in the maturation of the environmentalmovement over time is specialization, both within and across organiza-tions. As the sheer number of statutes has grown, and the nature ofregulation has become more complex, environmental groups have had tospecialize both internally and externally. The causation is, of course, notone way. Indeed, to some extent environmentalists have been responsiblefor the increase in legislative and .regulatory activity.

A second feature in the maturation of the environmentalmovement is that it is beginning to speak with more than one voice onimportant policy issues. While the movement recognizes the public valueof developing consensus positions, the competition among environmentalgroups is intense. This competition encourages groups to "productdifferentiate" so that they can claim to provide a unique and valuableservice to their supporters. In the future, we can expect to see a widerrange of environmentalist positions on issues as competition for financial

39. Command-and-control refers to a regulatory approach in which the regulator specifiesa particular technology or performance standard that the regulated party must adopt.Command-and-control is typically thought to be an inefficient method of regulation relativeto regulatory systems that provide firms with greater flexibility in achieving goals, such asmarketable permits and taxes. For example, the market-based proposal to curb emissionsthat cause acid rain could save as much as $1 billion annually over traditional command-and-control approaches, which would require selected power plants to install costlyscrubbers. See R. Hahn & R. Stavins, Incentives for Environmental Protection: Integrating Theoryand Practice, 82 Am. Econ. Rev. 464 (1992), for an assessment of the strengths and limitationsof this argument.

'Spring 1994]


support increases. I think this is a healthy departure from the past, whenthere was a fairly consistent "party" line, since it is not obvious whatapproaches are best suited for specific problems or which problems aremost important to attack first. The competition is likely to take placemore over the means for achieving objectives rather than the objectivesthemselves. Environmentalists will continue to adhere to the rhetoric thatzero pollution should be the appropriate goal of policy.

A second force affecting the nature of the environmental debateis industry. Like the environmental movement, industry has alsoundergone a maturation process, but of a slightly different kind. In 1970,industry had quite a bit of leeway to adopt whatever environmentalpolicies it wanted. It faced very little resistance because there was not awell-organized environmental movement.

Two decades later, the tables have turned. A new corporateconsciousness is emerging." Recycling and pollution prevention are nowpolitically correct. This change in consciousness has been caused by threefactors: first, there is a keen awareness that environmental costs are likelyto represent a larger and larger fraction of a company's bottom line.Second, there is a growing awareness that consumer preferences towardsthe environment and "greener" products makes it in the interest ofcorporations to develop a new, greener image. Finally, an old generationof managers is gradually being replaced by a new generation ofmanagers, who are more sensitive to environmental issues and whorecognize that environmental management is an integral part of doingbusiness.

Despite these changes within industry, it is still motivated by astrong sense of self interest. The 1990 Clean Air Act Amendmentsprovide a case in point. The major oil companies were interested inpreserving their market share for gasoline; the farm lobby strove toextend the subsidy for ethanol and mandate that ethanol be used as apollution control strategy in certain carbon monoxide non-attainmentareas; the natural gas producers tried to insert legislative language thatwould ensure that natural gas was used in fleets of vehicles; themethanol lobby tried to insert language that would make methanol lookfavorable in comparison with gasoline; the steel companies succeeded inproviding getting special treatment for coke ovens in regulationsgoverning air toxic emissions; and the auto manufacturers tried unsuc-cessfully to ensure that they would not have to add additional equipmentto control evaporative emissions. All of this is business-as-usual as these

40. See, for example, Cairncross, supra note 7.

[Vol, 34


industries try to enhance their bottom line, and jockey for position withintheir industry."

A third force, which is critical to understanding the shape ofenvironmental policy, is the EPA.42 Like environmental organizations,EPA has grown and become more specialized, largely as a result of thesteady stream of environmental laws. Table 7 shows the growth in EPAstaff and budget over time. There has been roughly a four-fold increasein staff since 1970.

Spending has increased from $205 million in 1970 to over $4billion in 1992, measured in current year dollars. Like environmentalorganizations, EPA recognizes the key to its continued growth lies inexpanding the list of environmental issues that need attention, andwriting regulations in such a way as to provide a greater need for EPA'sservices. EPA has a critical advantage over all of the other actors on theinside of the policy game, most notably Congress and the Administration.EPA is the principal repository for "factual" information about theenvironment. Congress and the Administration rely very heavily on EPAas a source of information. By using its critical position in analyzing anddisseminating information among government policy elites, EPA is ableto move regulations and laws in the direction its staff prefers.

In the late 1970s, under Administrator Douglas Costle, EPA beganto highlight the importance of implementing pollution controls to protecthuman health. It now has become apparent that such risks, at least thosecausing cancer, are likely to be relatively small.43 Moreover, those healthrisks that remain are from sources that are more difficult to control ormonitor. For example, "non-point" sources of pollution, such as pesticiderun-off into streams, is by its nature difficult to monitor and control. TheAgency is still trying to address these remaining risks, but it is alsoturning its attention to other issues related to the management ofecological systems.' While many of these concerns may be justified onthe basis of the science, they are also consistent with the interest of thebureaucracy in expanding its influence over corporations and the lives ofordinary individuals.45

41. Businesses may use environmental regulation as a way of imposing higher costs onother firms within the same industry or potential entrants to that industry. Thus, forexample, some large biotechnology firms might support regulations that require additionalpaperwork or testing if such regulations put smaller firms at a competitive disadvantage.See generally M. Maloney & R. McCormick, A Positive Theory of Environmental QualityRegulation, 25 J. Law & Econ. 99 (1982).

42. A. Marcus, Environmental Protection Agency, in The Politics of Regulation U. Wilson ed.,1980).

43. Doll & Peto, supra note 3.44. M. Greve, The EPA Rediscovers the Enviromnent, 2 Am. Enterprise 52 (Nov./Dec. 1991).45. F. Blake, The Politics of the Environment: Does Washington Know Best?, 1 Am. Enterprise

Spring 1994]


Table 7

STAFFING AND BUDGET AT THEENVIRONMENTAL PROTECTION AGENCY'

Year Staffing Costs(Permanent (Millions ofFull-Time Dollars inPositions) Obligations)

1970 4,093 $ 2051975 10,440 $ 7941980 13,045 $1,3601981 12,720 $1,3451982 11,402 $1,3631983 10,940 $1,3241984 11,562 $1,6391985 12,590 $1,9281986 13,115 $1,8601987 13,649 $2,6421988 14,078 $3,1091989 14,539 $3,3091990 15,587 $3,5941991 16,241 $3,9791992 16,874 $4,41119932 17,495 $4,41319942 17,276 $4,213

'All costs are in current year dollars. Figures are based on fiscal years. Construction grantsare excluded from the calculation of the regulatory expenditures and staffing at the U.S.EPA.2Estimated.

Source: M. Warren & J. Lis, Regulatory Standstill: Analysis of the 1993 Federal Budget (June1992) (Wash. U., Center for the Study of Am. Bus., Occasional Paper No. 105).

6 (Mar./Apr. 1990).

(Vol. 34


A final force, which will probably be the most important inshaping environmental policy in the future, is the apparent increase indemand on the part of the public for a cleaner environment.' Whilethis demand is difficult to measure, polling data suggests that the publicranks the environment as one of the critical issues that it wants politiciansto address. Some have argued that this increase in demand takes the formof a new environmental ethic or consciousness.47 The increase indemand has had some noticeable consequences. There is a greaterconcern with global issues such as climate change, sustainable develop-ment, and stratospheric ozone depletion. This is driven, in part, byscience, but public perceptions also play a critical role. People arebecoming increasingly concerned about how man's activity relates to thehealth of the planet. Boulding argued that the appropriate metaphor is tothink of the earth as a spaceship, which has a limited assimilativecapacity." Related to these concerns, there is increasing reluctance on thepart of individuals to live near landfills that contain hazardous andnonhazardous waste. The NIMBY problem, or "not-in-my-back-yard"syndrome, is a political hot potato. For example, states are becomingmore concerned about receiving wastes from other states, even when thatwaste is disposed of using the best available procedures that are thoughtto impose minimal risk. Similar concerns are arising worldwide relatedto the shipment of waste across national boundaries. Indeed, one couldargue that we are in the process of experiencing the internationalizationof environmental regulation.49

We are now running a large-scale natural experiment inenvironmental policy. Politicians, driven largely by NIMBY-mania,continue to limit the ways waste can be legally handled. As Tarr notes inan insightful essay, history is replete with efforts, usually unsuccessful,at finding the "ultimate sink" for wastes.' Now, we are slowly andawkwardly moving towards a political reality in which no sink isacceptable. In the United States, it is becoming more difficult andexpensive to dispose of hazardous wastes on land; the incineration ofsuch wastes has been banned at sea; and it is becoming more difficult to

46. R. Mitchell, Public Opinion and the Green Lobby: Poised for the 1990s?, in EnvironmentalPolicy in the 1990s: Toward a New Agenda (M. Kraft & N. Vig eds., 1990).

47. Paehlke, supra note 35; P. Portney, Overall Assessment and Future Directions, in PublicPolicies for Environmental Protection (P. Portney ed., 1990).

48. K. Boulding, The Economics of the Coming Spaceship Earth, in Environmental Quality ina Growing Economy (H. Jarrett ed., 1966).

49.R. Hahn & K. Richards, The hiternationalization of Envirownental Regulation, 30 Harv. Int'lL.J. 421 (1989).

50. J. Tarr, The Search for the Ultimate Sink: Urban Air, Land and Water Pollution in HistoricalPerspective, in Environmental History: Critical Issues in Comparative Perspective (K. Bailesed., 1985).

Spring 1994]


site incinerators that would burn the waste. The result, perhaps some-what unintentional, is a kind of pollution prevention policy, where goodcorporate actors are searching desperately for ways to reduce waste,while others are availing themselves of less desirable methods, sometimesillegal.51

Policy Themes

There are two pervasive themes in the development of federalenvironmental legislation. One relates to the limited utilization ofstandard welfare economics in the selection of environmental goals andinstruments. A second relates to the tendency of politicians to avoidplacing blame for environmental problems on voters or consumers;moreover, politicians are also reluctant to ask voters directly to shoulderthe burden of cleaning up the environment.

The limited application of economic principles can be attributedto the fact that there is no strong political lobby for economic efficiency.Indeed, as shown in Table 8, many of the laws allow only limited kindsof trade offs in developing regulations.

The two principal exceptions involve the screening of toxicchemicals under the Toxic Substances Control Act, and the screening ofpesticides under the Federal Insecticide, Fungicide and Rodenticide Act.Both of these statutes allow for the balancing of economic costs andbenefits. In meeting the primary and secondary standards for airpollution and meeting water quality goals, no such trade offs are allowed.Thus, economic analysis that uses conventional cost-benefit analysis is notpermissible. Even cost-effectiveness analysis, which takes the goal asgiven, and strives to identify policies that would achieve the goal usingthe fewest resources, is rarely applied. A number of the statutes allowsuch analysis, but outside of the Office of Management and Budget andthe Council of Economic Advisers, there is not a strong constituencyaimed at furthering such policies.

51. Examples range from the mundane oil change by an individual who puts the usedoil down the sewer to the more exotic "midnight dumping" that results from an unwilling-ness to pay the cost of legally disposing of wastes.

[Vol. 34


z

z0

z;zJ4p

0

-J

-J

-J

z

'a'ox fX X X

bX X *X X

1b x x XXf- X

10 X x XX x

X b X XXX X

X ab X XXX X

bbX x x xx

0

IZ s ;

2

0=

ul

C4 r

~-0

%O0

t r10. .

(9.0 v

Spring 19941


Industry would like to see greater application of cost-benefitanalysis, but environmental groups are reluctant because they believegreater application of this tool would result in relaxing of some environ-mental standards. 2 Moreover, environmental organizations (with theexception of the Environmental Defense Fund) continue to prefer using"command-and-control" approaches as opposed to market-based ap-proaches for addressing environmental issues.' In some cases, environ-mentalists and industry have settled on policies that may actually havehad adverse effects on the environment. Legislation that controls newsources, such as automobiles and power plants, provides some interestingcases. By requiring new power plants to install costly scrubbers, the 1977Clean Air Act amendments provided a powerful incentive to extend thelife of existing power plants that pollute more than new plants.'Automobile regulations provided a similar incentive for owners of oldcars to hold onto their vehicles longer.5

To address the wave of regulatory activity that began in the late1960s, all presidents, beginning with President Nixon, introducedregulatory oversight mechanisms with varying degrees of success.5%

Perhaps the most controversial of these was Executive Order 12291,signed by President Reagan, which called for performing a cost-benefitanalysis for "major" rules. Major rules were generally those that imposedcosts in excess of $100 million per year or were likely to have significanteconomic impacts. Agencies were asked to show that their proposed rulemaximized net benefits to the extent permitted by law. The success of thisoversight mechanism is largely in the eyes of the beholder. Thoselobbyists for efficiency would define success in terms of the extent to

52. Environmentalists threatened to oppose the elevation of the EPA Administrator to aCabinet Secretary if the Secretary were required to consider the balancing of costs andbenefits in rule making.

53. Some other environmental groups are now beginning to pay lip service to supportingmarketable permits. In addition, others are beginning to support green taxes, especiallywhen some of those taxes will be used to support the activities of environmental groups.The point is that we are beginning to see some movement on the part of these groups. See,for example, M. Kriz; Their Turn, Nat'l J., Feb. 13, 1993, at 388-91. Such movement is alsoreflected in R. Stavins & T. Grumbly, The Greening of the Market: Making tile Polluter Pay, inMandate For Change (W. Marshall & M. Schram eds., 1993).

54. B. Ackerman & W. Hassler, Clean Coal/Dirty Air. Or How the Clean Air Act becamea Multibillion-Dollar Bail-Out for High-Sulfur Coal Producers and What Should be DoneAbout It (1981).

55. H. Gruenspecht, Differential Regulation: The Case of Auto Emission Standards, 72 Am.Econ. Rev. 328 (May 1982).

56. C. DeMuth & D. Ginsburg, White House Review of Agency Rulemaking, 99 Harv. L. Rev.1075 (1986).; Fraas, supra note 34; K. Viscusi, The Mis-Specified Agenda: The 1980's Reformsin Health, Safety, and Environmental Regulation (Sept. 11, 1990) (on file with DukeUniversity).

[Vol, 34


which rulemakings were more economically efficient. On the other hand,some would argue that this administrative oversight is inappropriatebecause it is designed to undermine the intent of Congress.57 In myview, the impact of this regulatory oversight has been modest. Thereview process probably had its greatest impact during the first term ofthe Reagan Administration, and its impact has declined considerablysince that time.'

Sbme information on the regulatory review process between 1981-1991 is provided in Table 9.

The table illustrates three points: First, there is a large variationin the present value cost of rules over time, partially reflecting the normalebb and flow of legislative requirements. Second, to the extent there is atrend, it appears that the cost of rules that passed in a given year in thelast few years is higher than the first few years. Third, the latter part ofthe eighties showed a marked increase in the number of proposed andfinal major rules. The data suggest that environmental regulation isexpanding. Moreover, it is worth noting that the primary trend appearsin the second term of the Reagan Administration, thus casting doubt onthe extent to which a president can make lasting changes in environmen-tal regulation. The trend toward increased spending and regulation islikely to continue, unless there are substantial changes made in theregulatory oversight process both at the White House level and withinEPA.

57. A. Morrison, OMB Interference with Agency Ruleinaking: The Wrong Way to Write aRegulation, 99 Harv. L. Rev. 1059 (1986).

58. It is very difficult to measure the impact of regulatory oversight. For a discussion ofthese issues, see Environmental Policy under Reagan's Executive Order: The Role of Cost-Benefit Analysis (V. Smith ed., 1984); Fraas, supra note 34; R. Hahn, Regulation: Past, Presentand Future, 13 Harv. J.L. & Pub. Pol'y 167 (1990).

Spring 19941


Table 9

SUMMARY OF ACTIONON MAJOR EPA RULES, 1981-1991

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991

3 5 5 8 12 6 21 18 12 21 41

Present Value na 2 2Cost of MajorFinal Rules(Billions of 1990 dollars)

0 20 2 22 91 7 18 48'

Number ofProposed

and FinalMajor Rules

'Estimated by author.

Sources: A. Fraas, The Role of Economic Analysis in Shaping Environmental Policy, 54 Law &Contemp. Probs. 113 (1991); Telephone interview with A. Fraas (Nov. 22, 1991).

[Vol. 34

US. ENVIRONMENTAL POLICY

A second important pattern in environmental legislation is the.tendency to avoid placing any blame or responsibility for environmentalproblems on voters. The reason is relatively straightforward. If votersbelieve that they can have a clean environment without having to incurthe costs, they will be more likely to want it. Thus, Congress passesinefficient mileage standards for cars as a way of trying to reduce fuelconsumption. Similarly, auto manufacturers and oil companies areprimarily blamed for vehicle pollution without putting any responsibilityon the driver. Only as a last resort are drivers asked to participate inlimiting emissions by participating in inspection and maintenanceprograms. Economists will tell you that a good way to reduce energyconsumption or pollution is to impose an emission tax or a pollution fee.It is good in the sense that it can attain a particular objective at a lowercost than other alternatives, such as Corporate Average Fuel EconomyStandards or command-and-control regulation. It is bad, from thestandpoint of politicians and bureaucrats, in the sense that it makes thecosts of the objective more visible to the electorate, and thus placespoliticians who advocate such proposals at greater risk.

Congress and environmental interest groups perpetuate the myththat there are good guys and bad guys in the environmental protectiongame. The bad guys, not surprisingly, turn out to be the industrialists,who are incorrectly blamed for most of society's environmental ills.Would that the truth were that simple! In reality, special interestsinfluence legislators, Congress produces special interest legislation, andpolicy moves forward in fits and starts.5

In summary, the key forces that are driving environmental policyare changing. Politicians and bureaucrats can be expected to respond tothese changes. At the same time, there have been some important themesin environmental policy that have remained constant over the last twentyyears. Noteworthy among these are the propensity to pretend that peopledo not cause pollution and that economics is not particularly relevant inselecting among environmental policy options.

3. ENTER: THE "ENVIRONMENTAL" PRESIDENT

President Bush did not need an environmental movement toremind him that the environment is an important spiritual and economic

59. Special interests do not always win, a case in point being airline deregulation. See, forexample, M. Levine, Revisionism Revised? Airline Deregulation and the Public Interest, 44 Law& Contemp. Probs. 179 (1981). But much of environmental politics can be explained in termsof a standard interest group paradigm, where environmental groups are a potent force. Seegenerally R. Hahn, The Political Economy of Environmental Regulation: Towards a UnifyingFramework, 65 Pub. Choice 21 (1990).

Spring 19941


resource. An avid hunter and fisherman, he appreciated the need todevelop a strong economy in harmony with the environment. Indeed, asVice President, he participated in several regulatory decisions, such as thephasedown of lead in gasoline, that made sense from both an environ-mental and an economic perspective.

Bush's deep commitment to the environment was reflected, inpart, in his political choice to head the EPA-William Reilly. Reilly hasbeen a very effective spokesman for the environment and has helpedbring some credibility to the Republican party on environmental issues.

The political dimensions of the environmental movement havenot been lost on the Republican party. Bush was able to turn BostonHarbor into a Republican tea party with serious repercussions for theDukakis campaign. He was less successful in using the environment asan issue against then-Governor Clinton. While in office, President Bushstaked out aggressive policies in a number of environmental areas,including the phase out of chlorofluorocarbons by the end of the century,clean air, and reforestation. On the other hand, his administration wascriticized for failing to take more aggressive stands on a number ofissues, including global climate change.

This section critically evaluates the shape of Bush's environmentalagenda. Making such an evaluation requires defining a benchmarkagainst which to judge the Administration's environmental policyinitiatives. The benchmark selected here is a hypothetical DemocraticAdministration. My objective is to identify themes that are likely to affectthe evolution of environmental policy over the next two decades.

The Bush Administration released several publications summariz-ing its environmental accomplishments. 60 Table 10 provides an over-view of environmental initiatives during the Bush Presidency.

Undoubtedly, the crowning environmental achievement of theBush Administration was the 1990 Clean Air Act Amendments. PresidentBush helped break the logjam on revising the 1977 Clean Air ActAmendments. Since passage of the Act, the EPA and the Bush WhiteHouse had a number of discussions on how best to implement theprovisions. In addition, EPA was busily introducing voluntary programsto reduce energy usage and toxic emissions, initiating environmentalprograms in Eastern Europe, phasing out the use of chlorofluorocarbons,and supporting tree-planting initiatives.

60. See, for example, Council on Environmental Quality, supra note 6; Communications andPublic Affairs, supra note 25.

[Vol, 34


Table 10ENVIRONMENTAL ACHIEVEMENTS AS SEEN BY THE BUSH ADMINISTRATION

Clean Air Act Amendments of1990

Pollution Prevention Act of 1990

Basel Convention on the Trans-boundary Movement of Wastesigned March 1990

National Estuary Program April1990

Stratospheric Ozone Protectionagreement by Montreal Protocolmembers in June 1990

Global Forest Agreement of July1990

Oil Pollution Act of August 1990

Environmental Education ActNovember 1990

Green Lights Program January1991

Debt-for-Nature Swaps

Tree Planting

Enforcement Results

Recycling Efforts Redoubled

Toxic Releases Cut

Climate Change Research

Eastern Europe

EPA Cabinet Status

Green Fund

" Substantially reduces toxic air emissions and emissionscausing acid rain and smog; established market-basedapproach for reducing acid rain

" Establishes pollution prevention hierarchy: prevent orreduce at the source, recycle, treat, dispose or releaseinto the environment only as a last resort

" Eighty-country treaty requires notice of proposedhazardous waste shipments and prior written consent

• Adds five areas to the EPA's estuary program

" Phase out CFCs and other substances depleting ozonelayer by 2000

" Research, training, and technical assistance for bothtemperate and tropical rain forests

" EPA and U.S. Coast Guard in charge of implementingthis law; improves federal and state preparedness foroil spills; sets strict liabilities for cleanup costs;expands oil pollution research and development

• Establishes non-profit education and trainingfoundation funded by government grants and gifts

" Designed to save electricity and reduce pollution;voluntary program with major U.S. corporations toencourage the use of lighting designs and technologiesthat are energy efficient and profitable

" To strengthen economies and long-term conservationefforts in Latin America and the Caribbean; debtforgiveness in exchange for environmental initiatives

• Proposed reforestation program to plant one billiontrees per year across America; will help displacecarbon dioxide in the air and improve water and airquality

" Set new records for civil penalties, environmentalconvictions, and prison sentences

" Communities striving for EPA goal of 25% recycling ofmunicipal solid waste by 1992

" EPA launched voluntary reductions program withindustry

" Increased investments from $9.6 million in 1989 to $15million in 1990

" Provided assistance to Poland and East EuropeanEnvironmental Center

" Proposed legislation to create a U.S. Department ofthe Environment

" Provided $150 million to the World Bank GlobalEnvironment facility

Sources: U. S. Envfironmental Protection Agency, Envfironmental Stewardships EPA s First TwoYears in the Bush Administration (Communications and Public Affairs, 21K-1006, 1991),Council on Environmental Quality, The view from CEA: A collection of CEQ clips, Speachesand other current information (Sept. 30, 1991).

Spring 19941


What are we to make of this menu of initiatives? I have construct-ed a relatively simple taxonomy that consists of "major themes," "sub-themes" and "non-themes". Major themes correspond to what I see asmajor initiatives by the Bush Administration that represented importantdepartures from the past and that, arguably, would not have been centralin a Democratic administration. "Sub-themes" are also new and different,but less important in terms of how they affect the policy process. Finally,"non-themes" reflect what would have been business as usual. Thesenon-themes are largely driven by the evolving forces discussed in thepreceding section.

There are two major themes in environmental policy in the BushAdministration. The first is the promotion of market-based approaches toenvironmental control. By implementing a market-based approach forlimiting emissions that cause acid rain, President Bush made it clear thathe was interested in pursuing regulatory alternatives to command-and-control that would save money in achieving environmental qualityobjectives. Not only did the President spend a considerable amount oftime promoting this innovative approach to environmental control, butso did his key advisors on these issues: Administrator William Reilly,White House Counsel C. Boyden Gray and Michael Boskin, Chairman ofthe Council of Economic Advisers. These people argued persuasively thatcommand-and-control regulation should only be used as a last resort, andthat industry should be allowed to have more flexibility in achievingenvironmental goals.

While the Bush Administration deserved high marks fordeveloping a serious dialogue about market-based instruments in thepolicy arena, it failed to engage in a similar discussion about theappropriate goals of environmental policy. In fairness to the BushAdministration, no previous Administration had been willing to promotea serious dialogue about goals either. The rise of the environmentalmovement makes such a dialogue too costly in political terms. Politicalarguments in favor of market-based approaches to environmentalprotection rarely question the goal for which the instrument is beingdesigned. Designing a slick instrument to achieve an undesirable goal islike taking a fast train to the wrong station. Some recent proposals formarkets that have emerged from EPA have this flavor. Examples includeproposals to use markets to meet arbitrary recycling targets for newspa-pers and a statute endorsing the use of a market in oxygenate credits,which would effectively subsidize ethanol.

The second major theme of the Bush Administration is closelyrelated to the first theme, but has very different policy implications. Theessence of the theme is embodied in the following quote from PresidentBush:

[Vol, 34


To those who suggest we're only trying to balance economicgrowth and environmental protection, I say they miss thepoint. We are calling for an entirely new way of thinking toachieve both while compromising neither.'1

In this quote, President Bush echoes a theme that pervades thethinking within the upper echelons of the Environmental ProtectionAgency. He suggests that it is, indeed, possible to make substantialprogress in improving the environment while the economy continues togrow, perhaps at a faster rate than it would have in the absence of newenvironmental initiatives. In short, the American people can have theircake and eat it, too, if they apply more Yankee ingenuity to environmen-tal problem solving. While this argument has some credibility, it hasserious limitations if taken to an extreme. The Bush Administration mayhave been guilty of taking the argument to the extreme. This philosophyis exemplified in the "voluntary" reduction programs which EPA hasinitiated for reducing toxic releases and for saving electricity byintroducing more energy efficient technologies. Make no mistake aboutit. Some companies may save money by participating in these programs,but the majority participate either because they have their arms twistedor because they place a relative high value on being seen as "green". Forexample, Monsanto's "voluntary" cutbacks of their toxic releases were notdone because they would save money; nor were they done because theyposed substantial health risks. They were done because they provide avalue to the firm in terms of improving employee morale, recruitmentopportunities and public image.

The Pollution Prevention Act of 1990 is an excellent example ofhow philosophical views on the environment can adversely affect theeconomy. The Act is important not so much because of its immediateimpact, but because of what it suggests for the shape of future legislation.This Act creates a hierarchy for addressing pollution. The best approachis to prevent pollution; the second best is to recycle residuals safely; thethird best is to treat pollution; the worst is to dispose of residuals withouttreatment.' What is remarkable about this paradigm is that there is nomention of economics; nor is there any analysis suggesting why thishierarchy is necessarily better for the environment. We are simply askedto believe in the primacy of pollution prevention; yet, if pollutionprevention costs a great deal more than safe disposal, and societyvigorously pursues a prevention-first strategy, there may be fewerresources available for much-needed environmental improvements, such

61. See C. B. Gray & D. Rivkin, A 'No Regrets' Environmental Policy, 83 Foreign Pol'y 47,60 (1991) (citing quote from statement of the President on Apr. 18, 1990).

62. Communications and Public Affairs, snpra note 25.

Spring 19941


as saving the Chesapeake Bay. The point again is that pollution preven-tion is not free; it is probably a good idea in some instances and a badone in others. Adopting it as the method of choice without reference tooverall environmental and economic consequences is foolhardy.

This free-lunch philosophy also conveniently overlooks the factthat the majority of regulation that comes out of EPA is your run of themill command-and-control regulation. It continues to ignore the fact thatsuch regulations are becoming increasingly costly and doing less and lessto reduce risks to humans. In short, this theme, while appealing, maylead to public policies that are misguided.' We must accept the fact thatmany policies aimed at improving the environment will adversely affecteconomic growth and consumption as we now define it. There is nothingnecessarily wrong with this. Indeed, it may be desirable to change ourpattern of consumption and our view of man's relationship to theplanet." Merits of these changes notwithstanding, we should recognizewhat we are doing, and not hide behind the largely impoverishedrhetoric of win-win situations for the economy and the environment.'

While these two themes are major, Administrator Reilly highlight-ed two other important sub-themes. First, Reilly argued that we shoulduse science in thinking through environmental problems.6 While nota particularly radical idea, it is one that is sometimes overlooked in theenvironmental regulatory process. EPA's program offices often usestudies that are not subjected to scientific peer review, and these sameoffices often present worst-case analyses to try to make their case formore regulation. The Agency has instituted a "Total Quality Manage-ment" process aimed at improving the quality of information. In addition,Administrator Reilly established an environmental economics subcommit-tee of the Science Advisory Board. Whether the focus on quality willwork is debatable, since agency performance is difficult to measure.

A second important sub-theme that was promoted enthusiastical-ly by Administrator Reilly was the application of state-of-the art riskassessment measures to evaluate the ecological and health risks posed bydifferent environmental problems.' This effort builds upon a project

63. For an insightful critique of command-and-control that highlights how this approachcan impede innovation, see M. Ridley, How to Smother hinovation, Wall St. J., June 9, 1993,at A12.

64. W. Reilly, The Green Thumb of Capitalism: The Enviromuental Benefits of SustainableGrowth, 54 Pol'y Rev. 16 (1990).

65. For an alternative to the win-win rhetoric, which highlights the potential role forpolicy analysis, see R. Hahn, Toward a New Environtnental Paradign, 102 Yale L.J. 1719, 1750-54 (May 1993).

66. W. Reilly, Facing Facts on the Environmnent, Wash. Post, Aug, 20, 1991.67. Science Advisory Board, U.S. Environmental Protection Agency, SAB-EC-90-021,

Reducing Risk: Setting Priorities and Strategies for Environmental Protection (1990).

[Vol. 34


completed in the second term of the Reagan Administration.s Whilesuch efforts are laudable, it is unclear where they will lead. Mr. Reillytook some positive steps in explaining to the public that society may bebetter off by not acting in some cases-asbestos in schools being a notableexample. Unfortunately, integrating the risk assessment exercises into thepolicy process is virtually impossible. Programs involving the clean upof hazardous waste have taken on a life of their own that is largelydriven by the public's fears rather than what is known about theserisks.'

Turning to non-themes, undoubtedly the most important forconsumers is the escalation in pollution control costs, induced by thesteady flow of environmental regulations. Brookes argued that theabsence of OMB's regulatory branch in most high-level environmentaldecisions, particularly in the early part of the Bush presidency, did notbode well for keeping the lid on regulatory costs.' An EPA that issubject to minimal executive oversight will feel less pressure to justify itsrules in terms of costs and environmental benefits. To some extent, theCompetitiveness Council has attempted to oversee EPA, but this bodywas simply not in a position to seriously evaluate the steady stream ofregulations that EPA develops." Indeed, even OMB is incapable ofdoing this task very well. The appropriate place to perform such

68. Office of Policy Analysis & Office of Policy, Planning and Evaluation, U.S. Environ-mental Protection Agency, Overview Report, Unfinished Business: A ComparativeAssessment of Environmental Problems (1987).

69. In fairness to the public, the state of our knowledge about many of these risks is poor.See I National Research Council, Environmental Epidemiology: Public Health andHazardous Wastes (1991).

70. W. Brookes, Dead Wrong Again, 43 Nat'l Rev. 29 (1991).71. The Competitiveness Council, headed by former Vice President Quayle, was

frequently criticized for its role in shaping regulations. This criticism reflects a naturaltension between Congress and the Executive Branch about the extent to which the WhiteHouse should be able to influence agency policy. Those critical of the Council, and itspredecessor, the Task Force on Regulatory Relief, point out the impact these bodies have on"weakening" regulation. They typically ignore the fact that regulations may frequently notachieve their intended goals or may do so in a way that wastes billions of dollars.Moreover, they ignore the fact that the limited resources and political capital of the Councildoes not permit it to become engaged in the day-to-day workings of the various agencies.Indeed, Congress is much more well-suited to such tasks; the recent criticism of the Councilby concerned Democratic representatives suggests they intend to maintain their advantagein influencing the policies of government agencies. See D. Priest, Competitiveness CouncilUnder Scrutiny, Wash. Post, Nov. 26, 1991, at A19. For a critical view of the Council, see J.Mathews, Bush's Double Game, Wash. Post, Nov. 22, 1991, at A25. Mathews is a leadingenvironmentalist now serving in the Clinton Administration.

Ironically, Vice President Gore is now, taking a very active role in regulatorydecision making as well. See, for example, The Nanogramn Mafia, Wall St. J., June 29, 1993, atA18.

Spring 19941


functions is within EPA, making more judicious use of the agency'spolicy office to impose some intellectual discipline on the programoffices, who quite naturally wish to promote their programs.

In addition to ignoring the upward spiral in costs, there wereother important non-themes. The scope of regulation has been broadenedto include non-point sources of pollution, such as pesticides and cowmanure being washed into streams. The agency is also vigorouslypursuing an agenda aimed at measuring and defining risks to ecosys-tems. Enforcement efforts have increased, as have the penalties forviolating the law. As noted above, there is increased rhetoric aboutpollution prevention. Finally, more assistance on environmental problemsis being provided to developing countries in Eastern Europe and LatinAmerica. These areas of increased activity, while important, are labeledas non-themes because they are largely unaffected by the President or theparty in power.

In summary, the Bush presidency made two important substan-tive contributions to environmental policy that could change the natureof the debate for the foreseeable future. The first is to introduce the ideathat market-based approaches to environmental improvement arelegitimate policy tools that can and should be applied where appropriate.The second is to suggest that there are a multitude of ways to improvethe economy and the environment if we only try harder. The first isconstructive; the second is potentially dangerous. The free-lunchphilosophy tends to encourage policies that are highly inefficient from aneconomic perspective.

4. WHITHER ENVIRONMENTAL REGULATION?

Assuming the future of environmental regulation is related topast trends and emerging political forces, one can develop some sense ofhow federal environmental policy will evolve. Under President Clinton,there will be a secular increase in the level of regulation, but nothing nearthe level that Vice President Gore might like.' President Clinton ismore focused on economic issues and recognizes that he is unlikely tolose the support of the environmental community to a Republicancandidate. At the same time, many of his political appointments are fromenvironmental groups, and thus can be expected to support moreregulation in this area, independent of the economic consequences.

Given the level of political rhetoric about the CompetitivenessCouncil, President Clinton chose to implement an executive order that

72. See A. Gore, Jr., Earth in the Balance: Ecology and the Human Spirit (1992).

[Vol. 34


highlights openness in the regulatory decisionmaking process.73 Ironical-ly, the substance of the Executive Order is remarkably similar to theorders it replaces. Like the others, it calls for the maximization of netbenefits and the promulgation of cost-effective regulations wherepossible; however, the new Executive Order appears to place moreweight on non-quantifiable benefits as well as considerations of equityand distributive impacts.74

While it is too early to assess the impact of the Executive Order,there are three changes that are likely to lead to the promulgation ofregulations that are less economically efficient than earlier regulations.First, the scope of executive regulatory oversight has been narrowed tosignificant regulatory actions.7' This means that some regulations thatwill have potentially major impacts, and would have been reviewedunder previous executive orders, will not be reviewed by OMB underthis Executive Order. Second, the Executive Order has deadlines that willforce OMB to render a decision in a timely manner, even if the agencypromulgating the regulation fails to provide adequate information onwhich to base a credible economic analysis.76 Third, reporting require-ments on OMB personnel along with sunshine provisions; which requireagency personnel to be present at meetings with OMB and privateparties, are likely to increase congressional and agency power.','

One factor that could increase efficiency relative to previousexecutive orders is the requirement that existing regulations be periodi-cally reviewed. This idea, which builds on an effort undertaken at theend of the Bush Administration, could have enormous benefits ifimplemented seriously. However, the history of such efforts suggests thatthey are likely to fall on deaf political ears, even if they are executedfaithfully.

79

Ironically, while President Clinton and Vice President Gore railedagainst the evils of the Quayle Competitiveness Council, the new

73. Exec. Order No. 12866,29 Weekly Comp. Pres. Doc. 1925 (Sept. 30, 1993), reprinted in1993 U.S.C.C.A.N. B82.

74. Id.75. Id. at 889.76. Id. at B91.77. Id.78. Congressional power will increase because OMB officials are unlikely to be required

to log phone calls from Congress and its staff, while calls and letters from the private sectorwill have to be logged. Agency power is likely to increase because of the increase in require-ments on OMB officials, who are already understaffed.

79. During the Bush Administration, many agencies provided excellent recommendationson regulatory reform, which were largely ignored for political reasons. Several BushAdministration officials were hopeful that these reforms would be implemented if PresidentBush were reelected to a second term.

Spring 19941


Executive Order sets up a prominent role for the Office of the VicePresident.' Vice President Gore can be expected to use the power of hisoffice and the Executive Order to support policies that are pro-regulatory,as his attempt to shut down a hazardous waste incinerator in Ohioillustrates.8 As time goes by, however, it is likely that some attemptwill be made to rein in the costs of social regulation because of itsadverse impact on the economy.

This administration will continue to use rhetoric about the virtuesof market approaches for environmental protection and resourcemanagement. There is likely to be increased use of these approaches.Occasionally, the dreaded "t" word (tax) will also enter into the discus-sion, as it did with the recent gasoline tax increase, but it is unlikely toget very far in the near term; yet, the possibility of steeper energy orgasoline taxes is very real within the time frame of a decade. The BushAdministration was careful to leave environmental taxes (and "user"charges) at the fringe of the discussion. In contrast, President Clintonappears willing to experiment with increases in user charges, such asgrazing fees, to better manage resources.'

For Clinton, environmental policy is likely to remain a lowpolitical priority unless his appointees force the issue, or external eventsredirect his attention. This means that Vice President Gore and politicalappointees are likely to shape environmental policy in the near term.Administrator Browner appears to be lukewarm on the use of market-based approaches for environmental protection. The Administration hadan opportunity to champion such initiatives in an agreement that InteriorSecretary Babbitt designed to protect the Everglades. Instead, it chose tohighlight the environmental advantages of the proposed agreement. Italso had an opportunity to highlight the use of markets for reducinggreenhouse gas emissions in the Climate Change Action Plan. Instead, theplan highlighted the importance of achieving greenhouse gas emissionreductions through the use of a host of "voluntary" measures; marketsbarely received an honorable mention. Nonetheless, there seems to* beincreasing recognition inside and outside the Clinton Administration thatmarket-oriented policies can actually improve economic productivity andenvironmental quality. Examples include policies designed to raisegrazing fees, markets for improving water management and reducing air

80. id. at B84.81. See, for example, K. Schneider, Gore Says Clinton Will Try to Halt Incinerator, N.Y. Times,

Dec. 7, 1992, at D9.82. The Bush presidency did take credit for imposing an excise tax on the sale of chloro-

fluorocarbons, but this was largely a back-room maneuver implemented with the primaryintent of raising revenues. Interestingly, the tax may have been set high enough to reducedomestic production. See Communications and Public Affairs, supra note 25, at 15.

[Vol. 34 (


pollution, and the removal of subsidies for logging on government-owned land.

The impact of government programs, most notably defense-related activities, on the environment will become a larger issue. Thecrude estimates of the dollars required to clean up old weapons facilitiesand dispose of old weapons are staggering.' Moreover, no one reallybelieves that many of these cleanups will actually be completed becauseof the high costs. The Defense Department can be expected to seize theopportunity to enter a new line of business.

Over a longer time frame, the changing attitudes of the publicwill begin to have a marked impact on businesses and consumers.Pollution prevention will become a reality as it becomes prohibitivelyexpensive to put wastes in anyone's backyard. Moreover, there will beincreasing pressure on firms to supply data on their environmentalactivities. As noted above, the Toxics Release Inventory provides a strongincentive for firms to reduce emissions. This pressure is likely to continuein the future. Moreover, the information requirements are likely to beextended to smaller and smaller firms. Complementing the requirementsto provide more public information on emissions are greater demands tohave outsiders who are viewed as pro-environmental participate in themanagement of firms. This all adds up to greater scrutiny of day-to-daymanagement decisions.

At least over the next decade, states will play a more importantrole in starting new environmental initiatives. California has been"ahead" of federal regulators for quite some time, but other states arenow following suit with their own environmental initiatives. The increasein activity at the state level results from the benefits politicians can obtainfrom staking out policy positions that are seen as environmentallyprogressive. Prime candidates for state-led environmental initiativesinclude interstate shipment of hazardous wastes, automobile and fuelstandards, product labeling, recycling requirements and packaging rules.In addition, states have taken the lead in adding environmental costs tothe price of electricity paid by consumers and business.

More experimentation with market-based approaches andenvironmental taxes or energy taxes is also likely in the longer term.Economists and environmentalists from all parts of the political spectrumsee some merit in trying to encourage consumers to pay the "full" costof pollution. The exact method for imposing such costs, be they throughcharges or market-based approaches, is the subject of considerable debate.So, too, is the discussion about who should receive the revenues

83. P. Passell, Experts Question Staggering Costs of Toxic Cleanups, N.Y. Times, Sept. 1, 1991,at 1, § 1.

Spring 19941


associated with these various approaches. These differences notwithstand-ing, there is a consensus emerging that could have an impact on policy.Moreover, there is evidence that politicians on both sides of the aisle arebeginning to recognize the potential political value of endorsing economicapproaches to environmental protection.' Exactly how the use ofeconomic instruments for environmental protection will play out in thepolitical arena will depend, to a significant extent, on whether themarket-based approach used in the acid rain title of the Clean Air Act isperceived to be a success.

As part of this move towards using economic incentives, therecould be substantial changes in the tax structure over the next twodecades, moving away from income taxes and towards taxes based onenergy and pollution. The idea is not as far-fetched as it might firstappear. To place it in perspective, consider whether you would haveguessed ten years ago that a major piece of environmental legislationwould have contained a market-based approach toward reducing sulfuroxides emissions that cause acid rain. The forces that could movecountries to substitute energy and pollution taxes for income taxesinclude: (1) the argument that they protect the environment moreeffectively and (2) the argument that they enhance economic efficiency. 5

Packaged in the right manner, with due consideration of how variousincome groups would fare under a new tax regime, the right politicalentrepreneur could make a compelling case."

There will be growing competition for green dollars both hereand abroad."' Firms are already competing with environmental adver-tisements showing amber waves of grain in support of ethanol (nevermind the 54 cent/gallon subsidy), a pleasant colored liquid in a beakerto encourage consumers to purchase cleaner gasoline, and ice cream thatpromises to support politically correct environmental causes, such as the

84. Project 88: Harnessing Market Forces to Protect Our Environment-Initiatives for theNew President (R. Stavins ed., 1988) (a public policy study sponsored by Senator TimothyE: Wirth & Senator John Heinz).

85. But see L. Goulder, Effects of Carbon Taxes in an Economy with Prior Tax Distortions: AnIntertemtporat General Equilibriun Analysis (1993) (Working Paper, Stanford University).Goulder argues that energy taxes may lead to larger distortions than income taxes becausethey serve as an implicit tax on labor and capital and they also distort consumption choicesbetween energy and other products. Goulder's paper illustrates this idea for the case of acarbon tax. The potential increase in tax distortions must be weighted against the expectedenvironmental benefits from a tax shift.

86. The current political environment would probably require that a major shift fromincome to environmental or energy taxes be accompanied by an overall reduction in taxes.Even with such a reduction in overall taxes, the political battles can be expected to be fierce,as there will be significant concentrated losers.

87. F. Cairncross, The Environment: An Enemy, and Yet a Friend, The Economist, Sept. 8,1990, at 3.

[Vol, 34


preservation of rain forests in 'Brazil. The claims made by firms arebecoming harder for consumers and regulators to evaluate. Pressure willcontinue to grow for state and federal governments to provide standardsfor green labeling and advertising. Consumers would like to knowwhether cloth diapers are more environmentally sound than disposablediapers. The problem is that these issues are difficult to resolve. Theresult will be a set of environmental labels and claims that are onlytangentially related to environment quality, but which allows firms tocompete on the green dimension.'8

In terms of legislation, there will continue to be efforts to avoidallowing cost and cost/benefit comparisons to be made. The 1990 CleanAir Act Amendments and drinking water standards provide goodexamples. In the near term, these efforts will be successful." It is toorisky politically for environmentalists to allow trade offs among goals,even environmental goals, to be introduced explicitly within thelegislative or regulatory process.

Environmental groups will continue to grow in power andnumbers. The environmental devastation that has occurred in EasternEurope and the Soviet Union will allow these groups to broaden theiragenda, and develop an even more sophisticated world-wide networkthat can be used to mobilize public opinion on selected issues of theirchoosing.

At the same time, however, there will be increasing resistance toenvironmental absolutism. This resistance can be expected to come fromgroups that are directly affected by environmental regulations, such asproperty owners, and municipalities that are required to implement costlyenvironmental mandates. Over time, these kinds of groups can beexpected to have an important moderating impact on environmentalpolicy. They will help convince the public that there are real costs, as wellas benefits, to environmental policy. The likely outcome is that greaterconsideration will be given to costs in the development of new environ-mental laws and regulations.

International and regional problems will remain on the agenda.Environmentalists will find new opportunities in the international trade

88. Labeling a small set of products is likely to be costly and largely ineffective in anadvanced industrial economy, such as the U.S. economy. Using the price system is a muchmore effective way of transmitting information to hundreds of millions of decision makers.The price system in the U.S. does a reasonably good job at transmitting information aboutthe scarcity value of resources. While the price system is not perfect, it is likely to dominateother ad hoc approaches, such as selective labeling. Where there are significant externalitiesor market failures, then some form of regulation is appropriate, which attempts tointernalize these costs.

89. There could be legislation that will require some consideration of costs and benefits,but this legislation is not likely to have a major impact on agency behavior.

Spring 1994]


arena, where they will argue for the harmonization of environmentalstandards across countries. Environmentalists will also continue to pushfor a major international treaty on climate change. There is unlikely to bea significant multilateral agreement that addresses substance unless thescience settles down. Some countries may act on their own or in smallgroups, but bringing in major actors such as China, India and countriesthat formerly made up the Soviet Union will be difficult. The low averagestandard of living in some of these countries will make it difficult toreach a binding agreement without substantial offers of aid fromdeveloped countries.

Efforts aimed at curbing the excesses of environmental regula-tions will be largely unsuccessful if carried out at the White House level.The only way to sensibly address these issues is through a joint effortbetween the White House and political appointees at EPA; this effortwould require leadership that is willing to take some political heat. Thiswillingness will vary with the Administration and the economicconditions.

In conclusion, environmental regulation will continue to be agrowth industry for the foreseeable future. How this industry growscould have a dramatic impact on how we live from day to day. Rightnow, this growth industry is being driven by the inertia inherent in pastlegislation as well as the changing preferences of the electorate. It is alsobeing affected by new scientific and economic findings about how theenvironment affects our quality of life and how our quality of life affectsthe environment. We need to spend a great deal more effort understand-ing these linkages if we are to forge a future in which our children'schildren can enjoy a richer set of resources than we inherited.

[Vol. 34

United States Environmental Policy: Past, Present and Future

Documents

Transcript of United States Environmental Policy: Past, Present and Future